Question

n 2019, the top 4 customers of Brady Corp provided the following revenue. Jenny: $400 Svetlana: $300 Kerry: $900 Maria: $1,200 Brady Corp reported the following for 2019: Total Third Party Revenue. $6,000 Total Intersegment Revenue $9,000 Total Expenses $4,000 Under the major customer test, which customers must Brady Corp provide disclosure about. a. Kerry and Maria b. No customer disclosure required c. Kerry, Maria, Jenny, Svetlana d. Maria only e. Kerry, Maria and Jenny

Answer 1

Under the major customer test, Brady Corp needs to disclose revenue from Maria only, as she contributes 20% to the total revenue, which is above the 10% threshold.

Step-by-step explanation:

Under the major customer test, Brady Corp must disclose any customer that represents a significant portion of their revenue. Typically, the threshold for this disclosure is set at customers who account for 10% or more of the firm's total revenue. Given the numbers provided, we can see that Brady Corp has a total third party revenue of $6,000 and Maria alone contributes $1,200. This makes Maria's revenue exactly 20% of the total third party revenue, which requires disclosure under the major customer test. Kerry, Jenny, and Svetlana, however, do not meet the 10% threshold individually since their contributions are $900, $400, and $300, respectively. Therefore, only Maria meets the criteria for customer disclosure, making the correct answer d. Maria only.

Answer 2

Brady Corporation

Under the major customer test, the customers that Brady must provide disclosure about are:

b. No customer disclosure required.

Step-by-step explanation:

a) Data and Calculations:

Revenue by top 4 customers:

Jenny: $400

Svetlana: $300

Kerry: $900

Maria: $1,200

Brady Corp Income Statement Details:

Total Third Party Revenue $6,000

Total Intersegment Revenue $9,000

Total company revenue $15,000 (10% of $15,000 = $1,500)

Total Expenses $4,000

Total net operating income $11,000

b) The major customer test requires that if 10 percent or more of the revenue of Brady Corp is derived from sales to any single customer, this fact and the amount of revenue from each such customer shall be disclosed. In this case, there is no customer that gives Brady Corp 10% of its total revenue of $15,000 (or $1,500). It is only Maria that comes close to $1,500. Therefore, this major customer disclosure will not be made by Brady Corp. in 2019.